Low Restaurant Wages Drive Workers to Government Assistance

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A new study just came out that argues low-paying jobs, rather than unemployment, are the driving factor behind an over-reliance on government assistance programs like Medicaid and food stamps.

The study uncovered that 56 percent of state and federal dollars spent in the years between 2009 and 2011 actually went to people who were employed in low-wage jobs. In certain industries, around half of workforce participants are relying on welfare to make ends meet.

The top of the industry list? Fast food. In that industry, 52 percent of workers don’t make enough money to stay off welfare. One of the report’s authors, Ken Jacobs, chairman of the university’s Center for Labor Research and Education, said,

“When companies pay too little for workers to provide for their families, workers rely on public assistance programs to meet their basic needs.”

This type of cost off-shoring is dangerous for the economy. As we pointed out recently, restaurants like McDonald’s attempts to raise wages have been paltry at best. The report makes clear that tax-payers are in effect subsidizing underpaid workers at restaurant chains and in other industries.

Some economists, however, disagree with this assertion. Douglas Holtz-Eakin, for example, president of the American Action Forum, argues,

“The reality is that low-wage employers compete with income-support programs for the time of workers. Those programs may contribute to pricing low-skilled workers out of jobs and increasing the incentive to substitute modernization and technologies.”

Regardless of the perspective, the demographics who receive government assistance are dominated by working families. In fact, 74 percent of those who receive the earned income tax credit (or EIC), are part of a working family. Meanwhile, only 36 percent of food stamps and 32 percent of TANF (Temporary Assistance to Needy Families) went to working families in the years covered by the study.

Restaurants will have to carefully weigh the costs and benefits of paying their workers a living wage in terms of their bottom line, but also in terms of the ability to attract workers and to maintain goodwill in the communities where they operate.

Full story here: Get a Job? Most Welfare Recipients Already Have One